Key Person Insurance Explained

Key Person Insurance Explained

Key person insurance is a type of life insurance policy that safeguards businesses against financial devastation in the event of the death of an individual who is vital to the company’s success. Separate key person insurance policies are purchased for each key employee. This type of policy can also include disability coverage of the key person.

A key person can be an individual who:

  • Has a highly specialized role or unique set of crucial skills
  • Brings in a significant amount of sales
  • Makes imperative business decisions

Qualifications to be considered a key person:

  • Is critical to the livelihood of the business and actively works fulltime
  • Is not a government or seasonal employee

Who owns the key person insurance policy?

The company owns the policy, making them the beneficiary if the key person dies prematurely. This policy can also be used to buy out the key person’s shares or be gifted as a retirement benefit to the insured.

Advantages of key person insurance:

  • Policy is easily implemented and requires minimal maintenance
  • The use of funds is flexible
  • Life insurance benefits are paid to the company tax-free
  • Show clients, creditors, lenders, and stockholders that a solid continuity plan is in place for the business

How much does key person insurance cost?

Cost varies depending on business size, industry, and key person’s medical history and role in the company.


Connect with a member of our Commercial Risk team to learn about your options. 


This material has been prepared for informational purposes only. BRP Group, Inc. and its affiliates, do not provide tax, legal or accounting advice. Please consult with your own tax, legal or accounting professionals before engaging in any transaction.

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This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. Baldwin Risk Partners, LLC (“BRP”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. BRP does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, BRP does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.

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